Related Products

Related Events

The Treasury Department is delaying a report on the future of the government-sponsored enterprises from the end of January until mid-February.
Meanwhile, Moody's Investors Service is throwing its hat into the ring, arguing that the current model is not only unsustainable, but against government vision.
Residential mortgage analysts at the rating agency say that keeping Fannie Mae and Freddie Mac in the current manifestation would create two scenarios. And both are not good.
"If the GSE model is to be preserved, the companies would require far more capital and the risk premia on their debt would likely be much higher," write the analysts in a report Tuesday.
"This would, in turn, necessitate either significantly higher mortgage rates, in contradiction of the government’s first policy objective of providing affordable housing financing," they continue, "or require much more financial backing from the government, defeating the second, fiscal objective of maximizing private-sector participation in the $5 trillion GSE mortgage market in order to reduce the risk of taxpayer bailouts."
The report quotes Federal Housing Finance Agency figures that show Fannie may end up owing the U.S. government between $14.7 billion and $23.2 billion in annual preferred dividends — even though the company has never earned more than $8.1 billion.
Freddie may be on the hook for up to $10.4 billion to the Treasury. Freddie's highest yearly earning was in 2002, when the GSE posted $7.1 billion in profits.
"Clearly, the failure of the GSEs’ financial model, including their inability to service their preferred dividends over the longer term, mean that reform must occur at some point," they add.
Moody's is maintaining its stable rating on the GSEs and predicts a window of 12 to 18 months for reform.
"Although there are many directions GSE reform could take, we believe the likely path will result in the U.S. government supporting the senior obligations issued by the GSEs prior to the implementation of reform through their final maturities," they conclude, "as well as the continuance of the effective credit substitution of the U.S. sovereign rating for these instruments."
Write toJacob Gaffney.
Follow him on Twitter @JacobGaffney.

Jacob Gaffney is the Executive Editor of HousingWire and HousingWire.com. He previously covered securitization for Reuters and Source Media in London before returning to the United States in 2009. While in Europe for nearly a decade, he covered bank loans and the high yield market, in addition to commercial paper, student loan, auto and credit card space(s). At HousingWire, he began focusing his journalism on all aspects of the housing and mortgage markets.

This Month in HousingWireMagazine

Wow! That was our reaction to the response we received for this year’s HW TECH100 call for nominations. This year, more than 250 companies submitted a nomination, and we’re grateful for the interest in our efforts with this unique program..

In the tech world a “stack” refers to all the elements of something. For the mortgage industry, the idea of the single stack is that one platform (digital, automated and based in the cloud) can either meet all of the functional requirements involved in assembling a mortgage, or can serve as an efficient moderator for the process via open APIs (application programming interface), which are now taking off within the mortgage industry. Read More

Nothing reeks of hypocrisy more than the regulator ignoring regulations, but the CFPB has racked up plenty of violations in the last year. And we’re not talking about small, nitpicky examples, but instances that have real-life consequences. If a lender or servicer were to violate any of these standards, they could expect swift and harsh punishment from the CFPB. Read More